Monthly Archives: July 2012

Posted onJuly 31, 2012|Comments Off on 7 Investing Obstacles That Differentiate Frontier Markets From Other Markets

Adapted from an email conversation I’m in the middle of:

1. Information is the same, but different. Get used to doing anywhere between two and five times the legwork to achieve the same level of transparency, even if you have a physical presence in the market in question.

2. Benchmarking breakdown. Get used to the standard metrics you’re accustomed to having no meaning whatsoever in the context of what you’re looking at, and get acclimated to new metric definitions that don’t make sense anywhere else. Consider yourself extremely lucky if you can even make an honest “apples to apples” comparison. This is frequently a non-negotiable obstacle for certain parties abiding by mandates to invest in, say, AAA-rated paper, FASB-compliant companies or some other like-minded framework.Continue reading →

As of 2010, the total wealth of Wal-Mart heirs is as large as the bottom 48.8 million families in the wealth distribution (constituting 41.5 percent of all American families) combined. — Economic Policy Institute

“To us, Political Risk is static in a world of high-speed interaction and linkage. We foresee a movement away from content heavy deliverables to products that operate surveillance of regional social dynamics. We believe social dynamics shape political developments – and will do so more and more as populations intertwine with governments and businesses. Concomitant will be a fusion of business strategy and risk management.” — Evolving Risks

The multilayer distribution in India really adds to the cost of getting products to market and what goes for India also goes for other emerging economies…this is the first time Apple has made a clear signal as to why they don’t penetrate in India and that applies also to Africa, parts of Asia and eastern Europe…The large number of links in the retail distribution chain, spotty 3G coverage, a dearth of credit cards to buy apps and music from iTunes, and lower operator subsidies for new phones make all these regions harder for Apple to apply its “integrated” model. — FT
6 reasons Credit Suisse is bearish on China — Credit Suisse via Brazilian Bubble
“We have seen a lot of flow go through and heard some funds are selling short-dated France and buying short-dated Finland on the view that Finland might be the first country to leave the euro. There is now a premium on Finnish bonds for the potential of currency redenomination.” — Peter Allwright, co-head of the absolute return bond and currency team at RWC Partners, speaking to ReutersContinue reading →

A look at Ghana’s economy as new president sworn in — Reuters
In Ghana, the cedi, not politics, is the concern — beyondbrics
“The ability of the Fed to shape expectations such that the market does most of the heavy lifting has become known among Market Monetarist as the Chuck Norris effect. First coined by Nick Rowe, the idea is that just like Chuck Norris can use the threat of force to clear out a room without actually using force, so can a central bank use the threat of unlimited asset purchases to raise aggregate nominal spending without actually buying a lot of assets.” — David Beckworth at EconomonitorContinue reading →

With all due respect to Wells Fargo, hearing they’re looking into Frontier Markets investing is sort of like hearing J.C. Penney and Marks & Spencer are looking into selling guayaberas and sarongs (unless JCP and Marksies have entered Quezon City? Anyone?). Stereotypes aside, after watching Fox Business interview Wells Fargo Private Bank CIO Ron Florance and then reading about WF’s latest Southeast Asia due diligence trip, it looks like they’re serious. Fox Business, on the other hand, either insists on talking down to its viewers, or just assumes we’re all as goo-goo eyed about this as they are, but whatever, let’s have the clip done with so we can move on to the substance of what’s happening here:

“The death of Mills throws the competition for power at the December 2012 elections wide open, in a contest which will be intensely fought due to surging oil revenues. Ghana effectively has a two-party political system with the ruling National Democratic Congress (NDC) and the opposition National Patriotic Party (NPP) enjoying very similar levels of support. In the December 2008 presidential elections, Mills defeated the NPP candidate, Nana Akufo-Addo, with a very narrow majority (50.35% of the vote). Prior to the death of Mills, it was anticipated that the result of the 2012 would be equally close, although the stakes will be much higher. The anticipated increase in revenue from oil production in the next electoral term will grant the winning party significantly enhanced powers of patronage, potentially allowing them to cement their position in power. This is likely to continue to generate political tensions.” — Maplecroft

“Brazil, Mexico and Colombia–all investment grade–are the top names analysts and investors cite as the safest emerging-market credits. While it is just below investment grade, the Philippines is touted as another secure bet, given local investors’ sponsorship of government dollar bonds. These bonds’ recent correlation with U.S. Treasurys won’t protect them from selloffs if global markets undergo a severe downturn, analysts warn. As such, their haven status is largely confined to one within emerging markets.” — WSJContinue reading →

If you read this blog with any regularity, and you haven’t seen the Sandy Weill interview yet, you kind of need to block out four minutes right now to hear it all. If you don’t have the time, after the jump are two quotes that should raise the eyebrows of anyone who has been market-conscious for the past 15 years.

Posted onJuly 25, 2012|Comments Off on How the Global Carry Trade Distorts Reality

This is an ongoing conversation I’m having with a few people and there’s no way I’m going to get it all out now, but the core thesis is that “the market”, whatever that even means any more, is confusing optimism and relative value. Since I reside in Mexico, the evidence of this thesis is most obvious to me in the Mexican context, but conversations with trusted sources elsewhere in the world have led me to believe that this not just a Mexican thing but an Emerging Markets thing. And as of today, it seems even SoCal demigod and occasional Egyptian presidential contender Mohamed El-Erian agrees with me: Continue reading →

Ghana swears in John Dramani Mahama as new president — Al-Jazeera
In 2006, the U.S. Treasury Department estimated that somewhere around $50 billion in dollar currency is held in Argentina. (In contrast, Brazil had $1 billion.) — Latitude
3 Reasons Why Hosting the Olympics Is a Loser’s Game — The AtlanticContinue reading →

Some interesting graphics I happened to bump into over the past 24 hours:

1. Africa is exporting more volume to China, but as a percentage of the total, China’s take has remained constant for two years now. So you do that math. Other new players in town include Brazil, India, Turkey, South Korea. Check this out:

The confusion kicked off with an announcement from President Michael Sata’s government that a plan to rebase the currency by three decimal places has since been put on hold. Meanwhile, it has outlawed the use of foreign currency in domestic goods and services transactions, with penalties for transgression that include up to 10 years in prison. The immediate upshot of this measure was a short-term appreciation for the kwacha as Zambians rushed to sell dollars through official channels. Continue reading →

South Sudan Struggles as Foreign Currency Dries Up — WSJ
“Africa’s commitment to China’s development has been demonstrated by supply of raw materials, other products and technology transfer. This trade pattern is unsustainable in the long term. Africa’s past economic experience with Europe dictates a need to be cautious when entering into partnerships with other economies.” — Jacob Zuma, as told to the Washington Post
US poverty on track to rise to highest since 1960s — APContinue reading →

Posted onJuly 20, 2012|Comments Off on The top 5 challenges to India’s economy

So says Indian Prime Minister Manmohan Singh:

Bring complete clarity on all tax matters. We want the world to know that India treats everyone fairly and reasonably and there will be no arbitrariness in tax matters.

Control the fiscal deficit through a series of measures which my officials are working on and on which we will build consensus in the government.

Revive the Mutual Fund and Insurance industries which have seen a downturn. Absence of investment avenues has pushed Indian savings into gold. We need to open new doors so that savings can be recycled into productive investments that create jobs and growth, not into gold.

The cost of Venezuela’s oil discounts: $100 billion — Caracas Chronicles
Uncertainty still looms for Nigerian banks — Wulterkens
“If we are counting on sources such as shale/tight oil, oil sands, and deepwater to replace production lost from mature conventional oil fields, the days of cheap oil are never going to return.” The Peak Oil debate continues — James Hamilton at EconomonitorContinue reading →